A little over a year ago I decided to study the impact of FinTech on financial inclusion in India as part of my MBA thesis for my double degree at Fudan University, Shanghai.

Financial inclusion in itself can be fairly broad. I chose to look at the first layer – transactions with a very small focus on the second layer – ability to avail of credit. In 2014 the government launched Pradhan Mantri Jan Dhan Yojna (PMJDY) an initiative to give the financially excluded people of India access to basic banking facilities. It helped from a traditional standpoint by reducing the unbanked population by 185 million people in a year and until January 25, 2017 the total number of accounts opened were 273 million.

However, when I left India to pursue my MBA in Aug 2015 I did not see much use of FinTech solutions around me, and if at all it was by users who were financially included.

Come 2017, the landscape in both financial inclusion, FinTech, and the crossover of the two has changed dramatically and the change has accelerated even more since I concluded my research in March this year and it continues to transform and develop.

So what contributed to this drastic change?

A multitude of reasons! Some are fairly straightforward – affordability of mobile phones and smartphones and also data connectivityDemonetization is among the other factors that contributed and is quite unique to India in itself. Although there have been reportings of people transitioning back to using cash, there has also been a fair increase in the use of e-wallets. India stack which includes the Aadhaar number/card rolled out to provide almost all residents in India with digital identification and in turn also enables seamless digital transactions.

Although I currently don’t live in India, I have seen the change and the adoption of FinTech solutions during my short trips back and have heard from people I know (both from individual and company/industry perspectives). Vegetable vendors, maids, rickshaw drivers and others from low-income groups in both urban and rural India are more accepting of technology and are able to use/afford new ways to transact to make their lives easier.

The stats available are fairly dated or not necessarily on an apples to apples comparison so it’s challenging to link what you see, hear and then read/research. But l took a shot at it because numbers always add some context and it shows that there’s definitely more room to create an impact.

There are about 730 million unique mobile phone users in India, which is about 54% of the population. And then only about 33% of these mobile phone users have smartphonesleading up to ~180 million people. Even if we do not only look at smartphone internet usage, about 430 million people currently use the internet, of which 92% in the rural areas use it through their mobile phones. But, what’s the internet/data penetration rate? Urban penetration is about 60%, but in the rural areas it’s not even a fourth, it’s merely 13%.

However, on some level data connectivity might not matter as much because many solutions are being developed for phones or areas that do not support data connections. The government led initiative – UPI (and BHIM app) payments also makes it much easier to be financially included when one does not have basic mobile data or for those who might not own a smartphone.

The leading telecom operators, Airtel and Vodafone, and the leading payments FinTech company Paytm have obtained the Payments Banks license. Airtel Payments Bank has already launched pilot programs in various states of India. The traditional India Post is also partaking in this initiative and is widespread in parts which do not have banking solutions.

Many solutions may be launched, supporting infrastructure continues to improve and regulation could be more liberal.

But there also needs to be an educational and cultural mind-set change to adopt and accept these solutions. The older generation is still accepting the technology wave. Many are still wary of netbanking and online transactions and not familiar with these FinTech Apps on their smartphones. Some states have more stringent requirements for Aadhaar cards and some individuals do not have or are not able to attain the valid documentation to apply for an Aadhaar card. Unfortunately there are still some rural villages that do not allow women to use mobile phones thus limiting their access.

To have a country with over 1.3 billion people financially included is no easy feat, let alone through FinTech, but the attempt that different stakeholders are making towards this goal is definitely encouraging.


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Anisha Kundu

Anisha Kundu

AVP Marvelstone Capital

Anisha is an AVP at Marvelsone Capital, with years of professional experience in the finance industry. Prior to Marvelstone Capital, she worked at JP Morgan and CRISIL Ltd. Anisha holds an MBA from NUS Business School.

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